SIPP Tax Relief vs Salary Sacrifice

DennisTenus

Hi,

According to https://www.hl.co.uk/pensions/sipp the government will give you up to 46% tax relief on the amount you pay in to a SIPP.

My work pension is Salary Sacrifice and I'm a higher rate tax payer.

So is it better to pay into a SIPP and get the 46% tax relief or Salary Sacrifice? or does it work out the same?

Also, is HL a good SIPP provider? Is their 0.45% annual charge reasonable?

Thanks

NoMore

Tax relief will work out the same, but in Sal. Sac, you get the advantage of saving on NI as well

DennisTenus

Ok thanks, I don't understand how it be the same as I thought I'm taxed 40% but would I get 46% back in tax relief?

NoMore

Higher and top-rate taxpayers
If you pay 40% income tax, you can claim back up to an extra 20% on your tax return. That means a £10,000 pension pot could effectively only cost you £6,000.

If you’re a 45% taxpayer, you can claim back up to 25% on your tax return.

You must pay sufficient tax at the higher or top-rate to claim the full 40% or 45% tax relief.

If you’re a Scottish taxpayer, you can claim up to 46% tax relief. Take a look at our information on the Scottish income tax changes page.

Your not paying 46% tax on anything ?

DennisTenus

Oh so the 46% tax relief statement is the MAX someone in Scotland could claim back and doesn't even apply to England?!

NoMore

They don't give you tax relief on tax you haven't paid (except if your a non earner).

So you don't earn enough to pay at the 45% tax band so won't get tax relief at that level

DennisTenus

I see.

I guess I missed the important 2 words "up to"

So definitely best to just put more in my work scheme then.

lisyloo

The money going into your work scheme will save employees NI.
It also possible your employer passes on some or all of the employers NI savings, but that is up to your employer.

So yes salary sacrifice is best.